Posts Tagged ‘economy’

[Editor’s note: Colorado’s oldest newspaper published its final edition today, Friday February 27, 2009. The Rocky Mountain News, less than two months away from its 150th anniversary, was closed after a search for a buyer proved unsuccessful. Video above document’s the emotional Final Edition of the Rocky Mountain News. Scary times for the 4th Estate and democracy, let alone the economy. Video is by Matthew Roberts via Vimeo. Tnx KL!]

It is with great sadness that we say goodbye to you today. Our time chronicling the life of Denver and Colorado, the nation and the world, is over. Thousands of men and women have worked at this newspaper since William Byers produced its first edition on the banks of Cherry Creek on April 23, 1859. We speak, we believe, for all of them, when we say that it has been an honor to serve you. To have reached this day, the final edition of the Rocky Mountain News, just 55 days shy of its 150th birthday is painful. We will scatter. And all that will be left are the stories we have told, captured on microfilm or in digital archives, devices unimaginable in those first days. But what was present in the paper then and has remained to this day is a belief in this community and the people who make it what it has become and what it will be. We part in sorrow because we know so much lies ahead that will be worth telling, and we will not be there to do so. We have celebrated life in Colorado, praising its ways, but we have warned, too, against steps we thought were mistaken. We have always been a part of this special place, striving to reflect it accurately and with compassion. We hope Coloradans will remember this newspaper fondly from generation to generation, a reminder of Denver’s history – the ambitions, foibles and virtues of its settlers and those who followed. We are confident that you will build on their dreams and find new ways to tell your story. Farewell – and thank you for so many memorable years together.

What are these renegade cybergeeks doing at the New York Times? Maybe saving it.

On the day Barack Obama was elected, a strange new feature appeared on the website of the New York Times. Called the Word Train, it asked a simple question: What one word describes your current state of mind? Readers could enter an adjective or select from a menu of options. They could specify whether they supported McCain or Obama. Below, the results appeared in six rows of adjectives, scrolling left to right, coded red or blue, descending in size of font. The larger the word, the more people felt that way.

All day long, the answers flowed by, a river of emotion—anonymous, uncheckable, hypnotic. You could click from Obama to McCain and watch the letters shift gradually from blue to red, the mood changing from giddy, energized, proud, and overwhelmed to horrified, ambivalent, disgusted, and numb.

It was a kind of poll. It was a kind of art piece. It was a kind of journalism, but what kind?

This past year has been catastrophic for the New York Times. Advertising dropped off a cliff. The stock sank by 60 percent, and by fall, the paper had been rated a junk investment, announced plans to mortgage its new building, slashed dividends, and, as of last week, was printing ads on the front page. So dire had the situation become, observers began to entertain thoughts about whether the enterprise might dissolve entirely—Michael Hirschorn just published a piece in TheAtlantic imagining an end date of (gulp) May. As this bad news crashed down, the jackals of Times hatred—right-wing ideologues and new-media hecklers alike—ate it up, finding confirmation of what they’d said all along: that the paper was a dinosaur, incapable of change, maddeningly assured as it sank beneath the weight of its own false authority.

And yet, even as the financial pages wrote the paper’s obit, deep within that fancy Renzo Piano palace across from the Port Authority, something hopeful has been going on: a kind of evolution. Each day, peculiar wings and gills poke up on the Times’ website—video, audio, “drillable” graphics. Beneath Nicholas Kristof’s op-ed column, there’s a link to his blog, Twitter feed, Facebook page, and YouTube videos. Coverage of Gaza features a time line linking to earlier reporting, video coverage, and an encyclopedic entry on Hamas. Throughout the election, glittering interactive maps let readers plumb voting results. There were 360-degree panoramas of the Democratic convention; audio “back story” with reporters like Adam Nagourney; searchable video of the debates. It was a radical reinvention of the Times voice, shattering the omniscient God-tones in which the paper had always grounded its coverage; the new features tugged the reader closer through comments and interactivity, rendering the relationship between reporter and audience more intimate, immediate, exposed.

Despite the swiftness of these changes, certainly compared with other newspapers’, their significance has been barely noted. That’s the way change happens on the web: The most startling experiments are absorbed in a day, then regarded with reflexive complacency. But lift your hands out of the virtual Palmolive and suddenly you recognize what you’ve been soaking in: not a cheap imitation of a print newspaper but a vastly superior version of one. It may be the only happy story in journalism.

I met with members of the teams that created the Word Train in a glass-walled conference room, appropriate for their fishbowl profession. There was Gabriel Dance, the multimedia producer, a talkative 27-year-old with two earrings and a love of The Big Lebowski. There were Matt Ericson and Steve Duenes from graphics, deadpan veterans who create the site’s interactive visuals—those pretty maps that conceal many file cabinets stuffed with data. And there was Aron Pilhofer, a skeptical career print journalist with “nerd tendencies,” one of the worried men who helped spearhead this mini-renaissance.

“It was surprisingly easy to make the case,” says Pilhofer, describing what he calls the “pinch-me meeting” that occurred in August 2007, when Pilhofer and Ericson sat down with deputy managing editor Jonathan Landman and Marc Frons, the CTO of Times Digital, to lobby for intervention into the Times’ online operation—swift investment in experimental online journalism before it was too late.

“The proposal was to create a newsroom: a group of developers-slash-journalists, or journalists-slash-developers, who would work on long-term, medium-term, short-term journalism—everything from elections to NFL penalties to kind of the stuff you see in the Word Train.” This team would “cut across all the desks,” providing a corrective to the maddening old system, in which each innovation required months for permissions and design. The new system elevated coders into full-fledged members of the Times—deputized to collaborate with reporters and editors, not merely to serve their needs.

To Pilhofer’s astonishment, Landman said yes on the spot. A month later, Pilhofer had his team: the Interactive Newsroom Technologies group, ten developers overseen by Frons and expected to collaborate with multimedia (run by Andrew DeVigal) and graphics. That fall, the Times entered its pricey new building, and online and off-line finally merged, physically, onto the same floor. Pragmatically, this meant access to the paper’s reporters, but it was also a key symbolic step, indicating the dissolution of the traditional condescension the print side of the paper held toward its virtual sibling.

“One of the New York Times’ roles in this new world is authority—and that’s probably the rarest commodity on the web,” explains Pilhofer as the waiter gives us our check. “That’s why in some respects we’re gung-ho and in other respects very conservative. Everything we do has to be to New York Times standards. Everything. And people are crazy about that. And that’s a good thing.”

Over time, Pilhofer adds, this is the role the Times can play: exciting online readers about the value of reportage, engaging them deeply in the Times’ specific brand of journalism—perhaps even so much that they might want to pay for it. If this comes true, it would mean this terrible year was not for nothing: that someday, this hard era would prove the turning point for the paper, the year when it didn’t go down, when it became something better. Pilhofer shrugs and puts his glass back down on the Algonquin table. “I just hope there’s a business model when we get there.”

[Editor’s note: This graphic from this Sunday’s Washington Post graphically breaks down who benefits from the bill’s spending measures. Most of the effect of the bill would be felt in 2009 and 2010. Thanks Karen!]

The centerpiece of President Obama’s domestic agenda is an $819 billion economic stimulus plan. The Senate will consider the measure this week, with an eye toward the amount of tax cuts and spending. Republicans and Democrats spar over what to consider a tax cut. An analysis by the nonpartisan Congressional Budget Office tallies the tax-cut portion to be significantly less than the one-third Democrats claim it to be.

[Editor's note: Beautiful, compact map in Thursday's paper showing 4 main natural gas pipelines feeding Europe from Russia on a globe. I think this map is by Laris Karklis. He even has the Arctic Circle on there!]

MOSCOW, Jan. 7 — Since the fall of the Soviet Union, Russia and Ukraine have wrangled over fuel prices, with both sides holding a powerful bargaining chip. Russia has had the natural gas Ukraine needs to power its industries. Ukraine has owned the pipelines Russia depends on to transport the gas it sells to Europe.

The two have often engaged in brinkmanship, threatening to cut off deliveries. But they have never followed through on the threats for very long – until now.

A confluence of factors tied to the global economic crisis and political uncertainty in both countries have altered the dynamics of the annual dispute. For the first time, Russian gas deliveries to Europe through Ukraine came to a complete halt Wednesday, as the standoff between the two countries stretched into a seventh day.

Russia accused Ukraine of shutting down pipelines that deliver a fifth of the continent’s fuel, while Ukraine charged that Russia had simply stopped sending gas. With more than a dozen countries scrambling to maintain heat and electricity amid a bitter cold snap, the European Union urged both countries to accept international monitors to verify gas flows.

Direct talks were scheduled to resume Thursday, but analysts said progress would be difficult for the same mix of economic and political reasons that led the two nations to dig in this week instead of compromising, as they had done in years past.

With its economy in deep trouble, Ukraine has little to lose by using its control of European fuel shipments to resist Russia’s demand for a price increase. By contrast, Russia is suffering huge losses in immediate gas revenue and enormous damage to its reputation as an energy partner seeking European investment. Yet political considerations seem to have prevented the Kremlin from surrendering.

The board from the centre of The Economist’s Christmas issue (or pdf version of board below)

These rules

Risk cards, currency and icons from the pdfs below (or you can use your diamond cufflinks, or any other mementos of your former wealth, to represent you on the board)

Four coins

Scissors (to cut out currency and cards)

Three or more players; probably six at most

HOW IT WORKS

Players start with 500m econos each. One player doubles as banker.

Players move round by throwing four coins and progressing as many squares as they throw heads. If a player throws four heads, he moves forward four spaces and has another turn; if he throws four tails, he throws again. When a player lands on a + square, he collects money from the bank; equally, when he lands on a minus square, he pays the bank.

The aim is to be the last solvent player. In order to achieve this, players try to eliminate the competition. Risk cards encourage players to pick on each other.

Players who cannot pay their fines may borrow from each other at any rate they care to settle on—for instance, 100% interest within three turns. They should negotiate with the other players to get the best rate possible. Players who cannot borrow must either go into Chapter 11 or be taken over.

[Editor’s note: Nigel Holmes, the big kahuna of information graphics, illustrates the January 2009 cover story in Harper’s magazine on the expensive economic price of 8 years of Bush. Good luck, Obama! Nigel Holmes was graphics director of Time magazine for sixteen years.Thanks Lynda!]

In the eight years since George W. Bush took office, nearly every component of the U.S. economy has deteriorated. The nation’s budget deficits, trade deficits, and debt have reached record levels. Unemployment and inflation are up, and household savings are down. Nearly 4 million manufacturing jobs have disappeared and, not coincidentally, 5 million more Americans have no health insurance. Consumer debt has almost doubled, and nearly one fifth of American homeowners are likely to owe more in mortgage debt than their homes are actually worth. Meanwhile, as we have reported previously, the final price for the war in Iraq is expected to reach at least $3 trillion.

As bad as things are, though, this is just the beginning. The Bush Administration not only has depressed the economy and racked up unprecedented debt; it also has made expensive new commitments to the Medicare Part D prescription drug program, to disability compensation and education benefits for veterans, to replenishing the military equipment consumed in the wars in Iraq and Afghanistan, and simply to paying interest on the debt itself.

The president is not solely to blame for American profligacy, of course. Congress approved inequitable tax cuts and spending binges, and the Federal Reserve and other regulators, along with the mortgage industry and millions of consumers, share responsibility for the housing collapse. Nonetheless, the outgoing administration has made a series of unwise economic choices that together will add up to a burdensome legacy.

Using conservative assumptions, we calculate that the bill for Bush-era excess—the total new debt combined with the total new accrued obligations— amounts to $10.35 trillion. This legacy will have long-term consequences for America’s prosperity, but it also will weigh heavily and immediately on the Obama Administration, which will need to spend money fast to get the economy moving again.

When George W. Bush took office, he inherited a budget surplus of $128 billion and a bright fiscal future. The Congressional Budget Office, the nonpartisan government agency responsible for estimating future expenditures and revenues, projected a cumulative budget surplus of about $5.6 trillion between 2002 and 2011, if the country stayed on track—which of course it did not. What happened instead was that the administration successfully pushed for not only two rounds of massive, inequitable tax cuts but also a 59 percent surge in government spending. The result has been the largest budget deficits in U.S. history, and estimates of the current deficit are climbing even as we go to press. In September, before the financial meltdown, the CBO projected the deficit for fiscal 2009 to reach $438 billion—about the same level as it was in 2008—but in October, Peter Orszag, the director of the CBO, predicted the deficit would reach $750 billion, and we believe that number could go higher still. Such increases are the result of several factors:

Iraq and Afghanistan The combined annual costs of the wars in Iraq and Afghanistan, including indirect costs, have shot from $20 billion in 2001 to more than $208 billion this year.

Other Defense But government spending on the rest of the military also has grown more quickly than at any time since the Vietnam War. Part of that growth is attributable to indirect costs of the Iraq war (such as the growing recruitment budget), but much of it stems from an unrelated spending spree on acquisitions, weapons systems, and research.

Medicare Entitlement spending has risen even faster than projected, in part because of another major initiative of the Bush Administration: the 2006 launch of Medicare Part D. This new provision, which provides prescription drug coverage for seniors, added $47.4 billion to the cost of Medicare in 2006—a jump that accounted for almost 12 percent of total Medicare spending.

Net Interest on Debt All of the new debt incurred to pay for the foregoing did not come free. Net interest, which fell in the early part of the Bush Administration as a result of Clinton-era belt-tightening, has begun to climb back toward record levels, and now is the fourth-largest spending category in the federal budget.

The result of deficit spending is debt. When President Bush took office, the national debt was $5.7 trillion. Now it is $10.6 trillion—and Congress voted in October to raise the debt ceiling to $11.3 trillion, the seventh such hike since President Bush took office and the second since last July. If, as is quite likely, we reach the new ceiling by January 20, the outgoing president will have managed to amass more debt than all of his predecessors combined.

And even that number may be too small. When the federal government took over Fannie Mae and Freddie Mac, it also assumed their $5.4 trillion debt. The accounting procedures used by the International Monetary Fund, and endorsed by the CBO, normally require that such debt also be taken into account, which means that the total national debt now may be as high as $15 trillion. (If we account for only the riskiest loans, however, that number would “only” be $12 trillion.)

But the pain most Americans are feeling right now is much more immediate. The increase in credit-card, automobile, mortgage, and other forms of personal debt—from around $8 trillion in 2000 (in current dollars) to more than $14 trillion today—also looms behind the implosion of our financial system. Had the value of assets increased in tandem, that increase might not have mattered, but what is remarkable about America’s debt binge under President Bush is that it primarily served consumption. Homebuyers used easy credit to buy overpriced houses, which they then refinanced to pay for every other kind of consumption, betting that in the end rising housing prices would balance the account. At the same time, household savings rates plummeted, hitting zero or less than zero in some areas. With housing prices in a slump and no money in the bank, the result, according to one estimate, will be more than 5,000 foreclosures per day—more than at any time since the Great Depression.

The national debt is now more than 70 percent of the gross domestic product, the highest such proportion in half a century. Where did all this debt come from? To an unprecedented extent, America depends on loans from China, Japan, and the Middle East. The share of public debt that is owed to foreign nationals has risen from 31 percent in 2000 to 46 percent today. This means that every man, woman, and child in the United States owes $9,000 to some other country.
The national debt has already nearly doubled in the Bush era, but the consequences of the president’s policies will continue to be felt for many years to come. We estimate that the total bill to the nation as a direct result of President Bush’s policies, in today’s dollars, is an amazing $10.35 trillion. This includes the new debt as well as liabilities that will need to be paid through 2018. We can break this legacy into eight components:

Increase in National Debt Debt has long been a fixture of American governance, of course, but—given the surplus President Bush inherited—even a conservative estimate of the Bush bill requires that we take into account the entirety at least of his addition to that debt. The Bush tax cuts lowered national revenues by about $1 trillion, even as the government spent nearly $900 billion in direct operations for the wars in Iraq and Afghanistan and added another $600 billion to the total spending on “regular” defense, a significant proportion of which is indirectly related to those wars. And because interest accrues on the outstanding debt, interest charges also will rise. It should be noted as well that this increase does not take into account another factor: had Clinton-era policies been kept in place the past eight years, the CBO estimates, the overall national debt actually would have significantly decreased. Cost: $4.9 trillion

Projected Deficit for 2009 The rapidly weakening economy means that tax revenues will fall off, even as unemployment benefits and other government spending rise. Congress also is likely to approve a significantly larger stimulus package, possibly in excess of $300 billion, and more spending on the bailouts already undertaken, as well as new bailouts and subsidies for struggling sectors such as the auto industry. Moreover, even assuming that the United States begins to withdraw combat troops from Iraq, we expect that the war’s costs will remain steady at best in 2009, as functions are transferred to private contractors. We also expect that Congress will extend the temporary fix of the alternative minimum tax and will enact some form of additional homeowner mortgage relief. For all these reasons, next year’s budget deficit easily could rise to a trillion dollars, so our estimate is a bare minimum. Cost: $0.75 trillion

Fannie Mae and Freddie Mac When the federal government took over these failing residential mortgage giants, it also assumed their $5.4 trillion in mortgage-backed securities and outstanding debt. Under conventional accounting standards, this entire amount should be counted as part of the national debt. It is difficult to predict, however, how much exposure the United States has really taken on. We have included what is likely to be the minimum additional debt that the CBO adds on for these agencies, which is the $1.6 trillion in risky unsecured debt. The final cost, however, will depend on how far housing prices fall, and how many houses go into foreclosure, which presents the incoming administration with a significant dilemma: if it spends less on stimulus it will need to spend more on Fannie Mae and Freddie Mac. Cost: $1.6 trillion

Debt from Other Bailouts Congress has already provided $700 billion in authority to purchase toxic mortgages and other assets through the Troubled Asset Relief Program. It also has committed another $800 billion to bailing out AIG, Bear Stearns, and other financial firms, and it most likely will extend this commitment to other core U.S. industries in the coming year. Although some of this cost will appear in the 2009 budget, much of it will not be accounted for until 2010 or later. Not all of the loans will go sour, so it is difficult to estimate the price tag on these programs. Cost: $0.5 trillion

Future Interest on New Debt The United States spends nearly $250 billion per year in net interest payments (interest paid on Treasury debt securities less interest received by the Social Security and other trust funds). The CBO projects that the net interest payable on the total debt will over the next decade exceed $3.35 trillion, of which about $1.5 trillion is directly attributable to the debt that we have taken on during the past eight years. Even this figure, however, understates the true amount of interest payable, because interest also will accrue on money that will need to be borrowed in the next ten years to pay for obligations incurred in the past eight years. Cost: $1.5 trillion

Medicare Part D The administration’s flagship prescription drug benefit program is expected to cost $800 billion over the next decade. It is possible, though, that the number will be larger. The program has been criticized because, unlike the department of Veterans Affairs, Medicare does not negotiate bulk price discounts with drug companies. In addition, the program coverage contains a “doughnut hole” whereby Part D stops paying for drugs after a senior receives prescriptions totaling $2,700, and doesn’t resume coverage until that senior has paid an additional $3,454 for drugs. Our estimate is based on the assumption that Congress will take steps to close the “doughnut hole” but also will take steps to encourage price negotiation with pharmaceutical companies. Cost: $0.8 trillion

Iraq and Afghanistan Veterans Entitlements For every U.S. serviceman or -woman killed in Iraq, fifteen more have been wounded, injured, or have contracted an illness serious enough to require medical evacuation. More than 350,000 U.S. veterans from the two wars have sought medical treatment from the Department of Veterans Affairs, and nearly 300,000 have filed applications for disability benefits (more than 90 percent of which are likely to be approved). The cost of providing medical care and disability benefits may eventually exceed even the cost of combat operations, and over just the next decade, using the most optimistic assumptions, taking care of these veterans is going to cost at least $59 billion. The president also reluctantly signed into law a measure that restored education benefits for new veterans in an updated G.I. Bill, which we estimate will cost $40 billion over the next decade. Cost: $0.1 trillion.

Rebuilding National Defense The armed forces have been severely depleted by the efforts in Iraq and Afghanistan, in terms of personnel, training, and equipment. While we urge spending reductions in some areas of defense (e.g., space-weapons programs and other projects with huge cost overruns), there is no doubt that the military will require a substantial expenditure to “reset” basic military strength. This includes the replenishment of aircraft, vehicles, and weaponry; restoring the National Guard to its previous strength; depreciation of equipment used or abandoned in Iraq; and the costs related to a partial withdrawal from Iraq, including the dismantling of some bases. In addition, the Pentagon will need to spend considerably more over the next decade on military hospitals, recruiting, and bonuses. Cost: $0.2 trillion

The worst legacy of the past eight years is that despite colossal government spending, most Americans are worse off than they were in 2001. This is because money was squandered in Iraq and given as a tax windfall to America’s richest individuals and corporations, rather than spent on such projects as education, infrastructure, and energy independence, which would have made all of us better off in the long term.

President Bush did manage, by way of deficit spending, to grow the economy by 20 percent during his tenure. But who benefited from that growth? Between 2002 and 2006, the wealthiest 10 percent of households saw more than 95 percent of the gains in income. And even within those rarefied strata, the gains tended to be concentrated at the very top. According to one study, the nation’s 15,000 richest families doubled their annual income, from $15 million to $30 million. And in that same period, corporate profits shot up by 68 percent—more than five times the growth seen in the overall economy.

Even as the wealthiest families have increased their holdings, the families at the center of the income spectrum saw their incomes shrink by 1 percent. In 2000, the average weekly earnings of production and nonsupervisory workers (70 percent of the workforce) amounted to $527 (in current dollars). Six years later, their wages had risen a mere $11, and those same workers have meanwhile seen their net worth (assets minus liabilities) wither as a result of falling home values, higher personal debt, and shrinking savings—factors now being exacerbated by the collapsing stock markets.

The extraordinary transfer of wealth that has taken place from ordinary households to the super-rich has been made possible by another transfer: borrowing money from future prosperity to pay for current consumption. For example, President Bush provided a much heralded $600 tax rebate to most families in 2001. But once interest rates return to more normal levels, simply servicing the new debt from the Bush years will require those same families to spend more than $2,000 a year, year after year, forever.

The Obama Administration, facing the most serious economic crisis in at least a generation, will need to mount an expansionary fiscal policy. The problem is how much the country’s debt mountain will crimp our ability to pay for the type of change we just voted for— better health care, public investment in alternative forms of energy, and a renewal of our aging roads and bridges— and that we need in order to rescue the economy.

The global financial crisis is denting the huge foreign exchange reserves of governments that bankrolled the Bush spending spree. Although our major creditors will continue lending to us, even they have their limits. If the world’s appetite for U.S. Treasury bonds begins to wane, that would likely drive up long-term interest rates and send the dollar lower, leading to inflation. Historically, governments faced with such impossible debt mountains have resorted to inflation in order to repay their debt more cheaply. But high inflation hits the poorest members of society hardest. Whether we struggle to break our addiction to deficit spending in order to pay off our debts, or wind up inflating them away, the economic mistakes of the George W. Bush White House will cast a long shadow over the next generation of Americans.

Linda J. Bilmes, a lecturer in public finance at Harvard University’s Kennedy School, is a former assistant secretary for administration, management, and budget in the U.S. Department of Commerce.

Joseph E. Stiglitz is University Professor of Economics at Columbia University and winner of the 2001 Nobel Prize in Economics. Bilmes and Stiglitz are co-authors of The Three Trillion Dollar War: The True Cost of the Iraq Conflict.

Nigel Holmes was the graphics director of Time magazine for sixteen years and is the author of Wordless Diagrams.

[Editor's note: President Elect Barack Obama has a lot riding on his shoulders these days. The economy has tanked and multiple wars drag on yet "hope" is high. How have other presidents faired in their first 100 days to deal with the problems they faced and in enacting the initiatives they championed on the campaign trail. This graphic from Good magazine's politics section shows us just that, tracking the 12 past presidents since 1933. Indicators include their popular vote, economic issues, social issues, foreign conflicts, diplomacy, first moments, red-phone moments, top secret issues, and energy issues. Thanks Patterson and Kristin!]

“I pledge you, I pledge myself, to a new deal for the American people,” Franklin D. Roosevelt told supporters in 1932 while accepting the presidential nomination. When he took office, he spent his first 100 days enacting a dizzying number of reforms designed to stablize an economically depressed nation. Since then, a president’s first 100 days have been an indicator of what he is able to accomplish. In January 2009, the clock starts again.

How did the world’s markets come to the brink of collapse? Some say regulators failed. Others claim deregulation left them handcuffed. Who’s right? Both are. This is the story of how Washington never caught up to Wall Street.

The New York Times has a great collection of interactive graphics and other multimedia and articles explaining the background of the financial crisis. This package was put together before this last fortnight’s market tourmoil, but still a good read.

Topics include:

Home Equity Loans

Rise of Credit Spreads Worldwide Outside US

Debt Hitting Home Across Classes and Ages

Calculator to Determine Your Personal Debt Load and How it Compares with Average

[Editor’s note: Glorified timeline with head shots and key issues and economic conditions facing the past three democratic presidents near the beginning of their terms, and the conditions Sen. Obama would face if elected. Republished from the Wall Street Journal. View full size graphic.]

Stocks and Housing Falter as Democrats’ Convention Opens

By BOB DAVIS and T.W. FARNAM
August 26, 2008; Page A1

Democrats convened in Denver on Monday with the economy’s woes muscling to the top of political concerns, as reflected in further drops in stocks and housing prices.

The Dow Jones Industrial Average tumbled 241.81 points, or 2.1%, to 11386.25, amid continuing worry over the economic and credit problems. Inventories of unsold homes rose to a record, while prices continued to slip, threatening to delay the housing market’s recovery.

Sen. Barack Obama, whom the party will nominate for president this week, addressed one of the key issues, the parlous state of the government-sponsored buyers of mortgages. “I don’t think we can allow Fannie Mae and Freddie Mac to collapse,” he said at a town-hall meeting in Davenport, Iowa, adding that their shareholders “shouldn’t be protected.”

Against this backdrop, Sen. Obama is proposing to use the government to remake economic policies in a way that hasn’t been seen in Washington in decades.

The last two Democratic presidents, Jimmy Carter and Bill Clinton, were hamstrung by rising deficits, feuds with Democrats in Congress and antigovernment sentiment in Washington. Sen. Obama’s advisers argue that he would be largely free from those constraints, easing the way for him to put in place big government programs, tax increases on the wealthy and trade restraints.

An Obama victory would be nearly certain to usher in a larger Democratic majority, which could give his proposals smoother sailing through Congress. If the economy is faltering if and when he takes office — as most economists and policy experts predict it will be — Mr. Obama would push for a stimulus plan with a price tag of $115 billion, his aides say. The plan would include $1,000 rebates for moderate-income and middle-class families, aid to state and local governments and heavy spending on roads, ports and levees and other infrastructure to create jobs.

Sen. Obama, in campaign appearances and discussions with staff, has said that he would start his term in office with three big economic priorities, apart from a possible stimulus plan. One would be a government health-care plan to cover millions without insurance. Another would be a system of tradable pollution permits to reduce emissions and bankroll alternative-energy projects. He’d also push the first increases in income-tax rates since 1993 and in capital-gains taxes since 1986.

In total, his top priorities would cost hundreds of billions of dollars a year, and some of them might require a stiff increase in regulation.

Rice University presidential historian Douglas Brinkley compares Sen. Obama’s approach on economic issues to the last Democrat to occupy the White House before Mr. Carter: Lyndon Johnson. But, he says, “it would be a Great Society with a small ‘g’ and a small ‘s’” because Sen. Obama isn’t planning anything as sweeping as the creation of Medicare, Medicaid and antipoverty agencies.

No matter what he plans, he might confront circumstances that divert him from his agenda, whether foreign threats from Iraq, Iran or Russia or a recession. Any such contingencies could consume his attention and divert many billions of dollars he would rather use otherwise.

Still, many presidents have pushed through their priorities despite major setbacks. President George W. Bush drove through two rounds of tax cuts while pursuing an unanticipated global war on terror. Ronald Reagan won tax cuts and deregulation despite years of Soviet challenges.